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MoneyU.K. Budget Deficit Offers Worrying Hints for Next Government

04:15  22 july  2019
04:15  22 july  2019 Source:   msn.com

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A budget deficit typically occurs when expenditures exceed revenue. The term is typically used to refer to government spending and national debt. Countries can counter budget deficits by promoting economic growth through fiscal policies, such as reducing government spending and increasing taxes.

A government budget is a financial statement presenting the government 's proposed revenues and spending for a financial year. The government budget balance, also alternatively referred to as general government balance, public budget balance, or public fiscal balance

U.K. Budget Deficit Offers Worrying Hints for Next Government © Getty Boris Johnson and Jeremy Hunt

Britain posted its largest June budget deficit in four years as spending surged and taxes failed to grow, underscoring the fiscal risks facing the next prime minister.

The increase means the gap in the second quarter is a third higher than a year earlier. That’s a wake-up call for Conservative leadership candidates Boris Johnson and Jeremy Hunt, whose proposed spending plans have already been criticised.

While part of the widening was driven by higher interest payments on inflation linked debt, Samuel Tombs at Pantheon Macroeconomics said it’s a “tentative sign that the economy is flagging.” The economy may have stagnated this quarter, payback for a strong start to the year.

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A budget deficit is when spending exceeds income. To reduce it, you must increase income or lower spending, whether you're a family or a government . A budget deficit is when spending exceeds income. The term applies to governments , although individuals, companies, and other organizations

The U .S. federal budget deficit will be .1 trillion in FY 2020. Here are the reasons why the deficit is out of control and when you should be concerned. U .S. military spending is greater than those of the next 10 largest government expenditures combined. It's four times greater than China's military

U.K. Budget Deficit Offers Worrying Hints for Next Government © Bloomberg Spending surges and taxes stay flat

After years of post-crisis austerity that narrowed Britain’s budget deficit, both candidates to be prime minister are seeking a change of tack, promising tens of billions of pounds of tax cuts and spending increases. Chancellor Philip Hammond, who oversaw part of that austerity drive, has been among those critical of the plans. The outlook for the public finances is additionally uncertain because of the threat of a no-deal Brexit hanging over the economy.

On Thursday, the Office for Budget Responsibility warned the leadership hopefuls that there is no “free lunch” when it comes to funding their commitments. The independent watchdog also said that a no-deal Brexit could add 30 billion pounds ($38 billion) a year to the deficit, dashing any hopes of balancing the books by the mid-2020s.

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The Budget Deficit generally relates to the government ’s expenditure and not the business or individual’s spending. There can be different types of budget deficits that can be classified on the basis of types of receipts and expenditures taken into the consideration.

The U .S. federal budget deficit rises during wars and recessions. The deficit is sometimes lower than the amount The U .S. budget deficit by year is how much more the federal government spends than it receives in That's when lenders begin to worry about whether it's safe to buy the country's bonds.

“A no-deal Brexit would hit both government revenue, through lower tax receipts, and expenditure, through the need for fiscal stimulus,” said Mike Jakeman, an economist at PwC. “But even if a no-deal Brexit is avoided, a new chancellor is likely to bring new priorities and, with a spending review on the horizon, could sanction a period of looser fiscal policy.”

The latest public-finance figures show the June shortfall more than doubled from a year earlier to 7.2 billion pounds. That left the deficit in the first three months of the fiscal year at 17.9 billion pounds, 33% more than in the same period of 2018.

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Higher spending and weak tax growth contributed to the widening. Spending was boosted by debt interest costs -- higher RPI pushed up payments on inflation-linked bonds -- and government outlays on goods and services.

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Some positives: Budget deficits increase government spending which in turn increases aggregate demand. Hence, more output and lower unemployment. Some negatives: Government funds its budget deficit through borrowing by issuing government bonds. That debt eventually has to be paid.

The U . K . budget deficit numbers are due this Wednesday. Progress toward the goal of deficit eradication has been patchy. As a proportion of GDP, the The government could make it easier for businesses to raise wages by offering some targeted relief on national insurance contributions.

The government’s fiscal mandate is for structural borrowing to be below 2% of GDP in 2020-21. The OBR estimates it can hit that in a no-deal Brexit scenario, but it will be decisively missed if commitments made by Johnson and Hunt are implemented.

The new government “looks highly likely to tear up the existing rules, setting the stage for a giveaway budget in the autumn,” said Tombs. The Conservatives are desperate to improve their poll rating and public support for austerity has crumbled, so a fiscal boost is coming.

MSN are empowering Women In Sport this summer. Find out more about our campaign and the charity fighting to promote the transformational and lifelong rewards of exercise for women and girls in the UK here.

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